We all need to eat. As the average American family spends $4,000 on groceries each year, that translates into an excellent opportunity to earn credit card rewards points. What is the best rewards credit card for groceries? Depending on how much you spend each year on groceries, you actually have two different options.
What is the best rewards credit card for groceries?
Blue Cash Everyday Card from American Express
Annual Fee: $0 Welcome Bonus Offer: $150 after spending $500 in first three months
The first option is the Blue Cash Everyday Card from American Express, which is the better option if you don’t want to pay an annual fee on your rewards credit card. You will earn 3% cash back at grocery stores - up to $6,000 per year in purchases.
Purchase Rewards
You will earn the following purchase rewards:
- 3% cash back at all U.S. supermarkets (up to $6,000 per year - then 1%)
- 2% cash back at U.S. gas stations and select department stores
- 1% cash back on all other purchases
Grocery Rewards
If you spend $6,000 a year on groceries, you earn $180 in cash rewards and then 1% on all remaining grocery purchases for the rest of the year. Even if you only spend the national average of $4,000 on groceries, you will earn $120 in rewards. Compared to a standard rewards card that might only pay 1% on grocery purchases, that's an additional $80 in your pocket every year!
As the Blue Cash Everyday doesn't charge an annual fee, you begin profiting from the enhanced reward rate with your first purchase. Even if you only use the Amex Blue Cash for grocery purchases, chances are, you are money ahead in terms of purchase rewards.
Be Careful Where You Buy Groceries
This "catch" doesn't exclusively apply to the Amex Blue Cash Everyday. There are many rewards credit cards that award 2 points per $1 on grocery purchases, if, it happens at a supermarket. This means you will most likely only earn 1 point per $1 if you buy your groceries from wholesale clubs like Costco and Sam's or discount stores such as Walmart, Target, or Amazon.
Credit card processors cannot differentiate grocery purchases from non-grocery purchases at these stores because they are retail stores that also happen to sell groceries. If you primarily shop at these stores, you might earn a better reward rate with their co-branded credit card.
As a side note, Costco no longer accepts American Express as a payment method since they transferred their credit card line to Citi in 2016.
$150 Welcome Offer
The Amex Blue Cash Everyday is also offering a pretty good signup bonus (welcome offer) for a no-fee cash back credit card. After spending $500 in your first three months, you will get an additional $150 back in cash rewards.
Assuming you spend your first $500 on groceries, your total cash back reward will be $165 when you include the purchase rewards earned from the grocery store.
Blue Cash Preferred from American Express
Annual Fee: $95 Welcome Bonus Offer: $150-$250 (depending on eligibility) after spending $1,000 in the first three months
Not to be confused with the Blue Cash Everyday, the Blue Cash Preferred has a $95 annual fee but you will earn 6% cash back on qualifying grocery purchases and earn a larger sign-up bonus.
The Blue Cash Preferred from American Express is a better option if you’re looking for a primary credit card because of the annual fee.
Purchase Rewards
With the Blue Cash Preferred, you will earn the following tiered purchase rewards:
- 6% cash back at U.S. supermarkets (1% after the first $6,000 spent each year)
- 3% cash back at U.S. gas stations and select U.S. department stores
- 1% cash back on all remaining purchases
Grocery Purchases
With a 6% reward rate on groceries, you will earn $360 if you spend $6,000. That's $180 more than the no-fee Blue Cash Everyday that earns 3%.
To "break even" with the $95 annual fee, you will need to spend at least $1,600 on grocery purchases each year to earn $96 in purchase rewards. Despite the annual fee, if you only use the Blue Cash Preferred for groceries, it is still the better option for total purchase when you spend more than $2,500 a year in groceries because you earn double the reward dollars.
Gas and Department Store Purchases
Being able to earn 3% cash back whenever you buy gas or shop at a select department store (excluding warehouse clubs, Walmart, Target, and Amazon), also justifies the annual fee. Being able to get 3% cash back at these places is better than most other rewards credit card. And, it helps make the Blue Cash Preferred one of the best cash back credit cards in the business.
$150 - $250 Welcome Offer
For some eligible people the welcome offer bonus payout is $100 higher than the no-fee Blue Cash Everyday, but, you must spend $1,000 within the first three months. It’s nice that the bonus amount can be higher to compensate for the increased minimum spend requirement, and, your earning potential is also better long-term because of the 6% vs. 3% tiered purchase rewards on groceries.
Blue Cash Everyday vs Blue Cash Preferred
Either of the Amex Blue Cash rewards credit cards is a good option as the best rewards credit card for groceries.
The Blue Cash Everyday is the better option if you don't spend enough to justify the annual fee or simply want a secondary credit card for when you visit the supermarket and make all your other purchases on a travel rewards card.
If you want the highest cash back rate for groceries and a respectable 3% reward for gas stations and supermarkets, choose the Blue Cash Preferred. It's an excellent option for a primary cash back credit card and even a secondary credit card if you spend at least $2,500 a year at grocery stores.
Alternatives to the Blue Cash Credit Cards
If you buy groceries at a wholesale club or discount store like Walmart or Target, you can be better off using a flat-rate rewards card like the Chase Freedom Unlimited that earns 1.5% on all purchases and these points can also be redeemed for travel rewards if you have the Chase Sapphire Preferred where points can be redeemed for 1.25 cents each or transferred to your favorite airline or hotel.
Making your purchases, grocery and non-grocery, on a flexible travel rewards card or even a co-branded travel credit card, can also be lucrative as your rewards points redeemable for award travel can be more beneficial than travel rewards.
Summary on Best Rewards Credit Card for Groceries
When you want to earn the best credit card rewards possible when you buy groceries, choose either of the Blue Cash credit cards from American Express. Whether you earn 3% or 6% at the supermarket, you will rack up the rewards quicker than any other card. They are both good options as a primary or secondary credit card to complement your spending needs.